For contractors working remotely (not on US soil), this is just plain wrong.

My company has employed numerous non-US contractors in about 10 different countries for more than a decade. We never opened an entity in another country, or filed extra paperwork. In fact, IRS Form 1099 does not even need to be filed for non-US contractors.

The link you posted is more about W-2 employees. Most of the problems it mentions go away when dealing with a 1099 contract relationship.

The post did actually talk about contractors:

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3.) Hiring contractors DOES work around some issues, but has its own downsides. First, we can't offer options/stock to contractors and we'd like all our employees to benefit from this. Second, we often can extend the same full time benefits we want all our employees to share such as healthcare, 401K, etc. Put another way: we want all HashiCorp employees to be employees, we don't want to create second class citizens.

Legally, some countries have legal limits on the hours a contractor can work or length of time they can be contracted before they're considered an "employee" by default and regardless of what you SAY the relationship is, the country will consider it employment and points 1 and 2 above all take effect immediately.

So we certainly DO hire contractors but our point of view is that we intend to hire those people full time over time. We'll often hire contractors if we know that we'll have a legal entity established to hire them within X months, and we're up front with the new hire about this. We'll also pro-rate option/stock vesting for their contractor period when they are hired.

> we want all HashiCorp employees to be employees, we don't want to create second class citizens.

This is incompatible with the original Ask HN question. HashiCorp is making arguments against hiring contractors while the OP is specifically asking about contracting (apparently not interested in benefits or stock options, etc)

Why wouldn't they be able to offer stock options to contractors? I'm an EU based contractor for a US (only) based company. I have stock options, as do other contractors and employees. No problem at all, just a bit of paperwork.

I have a friend who is in the same position as you. There is a difference between being employed and being a contractor. Since you get them in the capacity as a contracting person, they dont count as capital gains, but as ordinary salary when you excerce them where you obviously pay all your social security charges and much higher tax rate. At least thats the case where i live (europe). It is up to you though to declare it correctly. Its also logical as you have to do the same on your invoiced money as well.

I hope i didn't spoil it for you ;)

You can absolutely grant stock options to contractors. I have done it for engineering contractors in Eastern Europe who have worked with us for a long time.

Really, they can’t offer stock?

That doesn’t sound right. Maybe they don’t feel it would align the motivations correctly or something?

If I write some software for you and you pay me in stock, what’s the issue? I saw this done quite a bit during Startup Boom 1.0.

You can compensate all those benefits with pure cash.

Btw, you can offer options/stocks to contractors, worldwide.

"we can't" in a lot of times actually means "we don't want to"

It seemed that the OP was about being employed, i.e. W-2, given the mention of H1B visas. There are, of course, often various ways around that with contracting relationships but as the sibling comment notes, that has some limitations. (And, in general, for obvious reasons a company can't just effectively hire an employee and say "they're just a contractor" and skirt all the associated employment rules.

ADDED: On rereading, they do seem to be asking about the temporary remote contracting part. In which case, the answer is probably yes subject to the laws of their country.

There is no 1099 but IRS does have a W8-BEN form that may be required by the foreign contractor to fill out. It is not sent to IRS but for the business to record in case IRS asks.

https://www.irs.gov/pub/irs-pdf/fw8ben.pdf

Non-US person here, I've worked as a contractor for US companies for more than a decade. You don't need to set up an entity anywhere, that's only for hiring employees. All contractors need to do is sign a contract for providing services.

I can second this having done the same for many years. You often need to supply the company with a W8-BEN form, which they don't need to submit to the IRS, but they do need it on hand should they be asked for it. The form exempts the company from needing to do withholding of taxes in the US.

Yes, this is correct.

I agree with the other commenters that this is totally against my professional experience. US companies do not need to set up an entity outside of the US just to hire non-US contractors.

> The longer answer is you may need to establish a legal entity in the country in which you're hiring

Although other commenters have pointed out that this may not be needed w.r.t U.S. law, I just want to state that establishing a company in most countries where SW work are being outsourced to is not an easy task, especially as a foreigner. It requires office(Although it can be just a desk at co-working space) and plenty of legal compliances which are not worth it if you are intending to hire couple of resources from the said country.

That said, if you are planning to have majority of your dev work-force in that country, then establishing off-shore branch of your company in that country as a separate entity is common strategy being adopted(But the entity would require local executives with signing power to reduce the compliance hassle).

Are there any companies that help you incorporate all across the world with a single button press and manage the employee pay & PTO stuff in accordance with local laws?

Largely you can't; while Anglosphere jurisdictions generally have easy company formation, it can get increasingly difficult and complicated in other countries, and there's usually an ongoing filing effort to maintain the company presence.

Some countries like China simply won't let you incorporate there without a local "partner".

Same with India. You need a "local" Director.

This is basically one of the reasons large outsourcing firms exist.

No, but there are companies that are already incorporated in many countries across the world, and you can then use to employ people (ie you pay them, they pay employees in the target country).

They are called PEOs or EoR (professional employment organization / employer of record.. There are differences between the two)

When I've had this discussion, apparently not. Even within the US, it's not as simple as just "have ADP handle it" because lawyers need to be involved and there are even differences among states on how PTO needs to be handled for example.

Like all things legal their are gray areas :)